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Cheapest debt consolidation loan

Accumulated unpaid debts can easily put you in a financial crisis that you’ll find it hard to pull yourself off. And, the more the debts stay unpaid, the more losses you’ll incur on accumulated interests.


With a damaged credit profile, you’ll find it hard to access loan products with future lenders. Debt consolidation loans can pull you off this mess, and prevent further financial crises. 


These unsecured loan products will help pay off your existing loans so you only remain with a single debt to service.


In this article, we’ll explore all about debt consolidation loans. We’ll also advise on when you should go for these loans. But first, here are the cheapest debt consolidation loans in the market today;

  • Rep APR
  • Credit score
  • 5.99 - 24.99%
  • 640
  • 6.99 - 19.99%
  • 660
  • 4.49 - 20.49%
  • 660
  • Rep APR
  • Credit score
  • 6.94 - 35.97%
  • 580
  • 6.99 - 24.99%
  • 660
  • 7.95 - 35.99%
  • 640
  • APR range
  • Fees
  • Terms
  • Amounth
  • Unemployment protection
Bank 1
  • 6.95%–35.89%
  • Up to 5% transfer fee
  • 3–5 years
  • $1,000–$40,000
  • No
Bank 2
  • 6.95%–35.89%
  • Up to 5% transfer fee
  • 3–5 years
  • $1,000–$40,000
  • No
Bank 3
  • 6.95%–35.89%
  • Up to 5% transfer fee
  • 3–5 years
  • $1,000–$40,000
  • No

Table of Contents

Can I get the cheapest debt consolidation loan?

Yes, the cheapest debt consolidation loans are available for borrowers with excellent and good credit scores. Each lender will have their set policies that you must meet to get these loans.


Cheap consolidation loans are those with lower interests. They also come with affordable monthly repayment amounts and other flexible terms.


The whole point of consolidation is to help you stay afloat financially and prevent you from drowning in debts. It should also help you clear your debts faster and prevent interests from accumulating to an amount you won’t be able to service on time. 


The table above has the lenders with the cheapest debt consolidation loans today. Be sure to check them out. 


If you find it hard to understand an organization’s policies, ask them to clarify for you. alternatively, you can also seek expert advice from another source.

Hot Tip:

Remember to carry out your due diligence before applying for a loan product.

When getting a debt consolidation makes sense?

Personal loans are ideal for consolidating loans. However, it won’t be practical all the time. For that reason, knowing when to take it and when not to is key.


Remember, debt consolidation isn’t a one-off solution to all debt crises. Similarly, it won’t help fix bad financial and spending habits. Similarly, don’t consider debt consolidation if you’re totally drowned in debts without the hope of repaying.


Debt consolidation will only make sense when you get a lower interest rate than what you are paying in your current debts. You want to keep off debt consolidation if you can’t find lower rates. Such will only be expensive in the long run. 


The only time you should consider going for consolidation with higher rates is when you can’t afford to pay monthly installments for your auto loan. You’ll go for a consolidation loan with a longer term to avoid repossession. 


Consolidation will also make more sense if you don’t plan to continue spending and taking on new loans. Remember, consolidation loans are meant to keep you debt-free. 


Debt consolidation will also make sense if you can afford the monthly repayment of the new debt. Otherwise, you’ll only damage your credit profile further and end up spending more on accumulated interests, loan fees, and penalties. 


You’ll also possibly ruin your future chances of qualifying for better loan products.

Benefits of cheapest debt consolidation loan


  • Saves you money – The cheapest debt consolidation loans will save you lots of money. They come with lower interest rates than your accumulated debts. However, you might still pay more with the extended loan terms


  • Simplifies finances – debt consolidation integrates all your loans into a single repayment. The single debt comes with set repayment terms and a fixed rate. This way, you’ll stay organized. And, the whole payment process is simplified so you hardly miss payments


  • Might positively affect your credit score – a consolidation loan lowers your credit utilization ratio, especially for credit card loans. For credit agencies, your credit utilization ratio – the relationship between your credit limits and balances – has significant weight on your credit score. Further, debt consolidation helps you pay off multiple debts at once. This way, lenders will positively update your credit profile hence boosting your scores


To enjoy these benefits, you’ll have to be determined not to miss your repayments. Doing the contrary will hurt your already messed-up credit profile. 


Keeping up with the payments will also help you to access better loan products with lower rates and flexible terms in the future.


Again, consolidation can be a blessing or curse depending on how you handle your credit profile. The fact that you’ll repay multiple debts at once means you can access some more loans. Taking on new loans could further ruin your score.


Also, like we earlier noted, consolidation doesn’t fix your spending habits.

Hot Tip:

Learning to spend money wisely and only going for loans when absolutely necessary will help you avoid hurting your credit score.

Requirements to qualify

Different lenders have different policies of what a suitable borrower should be or possess. However, all lenders will require that you be a legal US resident, aged 18 years and above. 


This is the most basic requirement common among almost all lenders and is verified by looking at your ID, passport, or driving license. 


Other things lenders check include;


  • Credit history – a credit score of 600 and above will earn you a consolidation loan with most lenders. That will earn you lower rates and flexible repayment terms. Your loan repayment history will also play a major role here


  • Income – Lenders will also ask for proof of income. This serves as an assurance to lenders that you’ll afford to repay your loan. While at it, they’ll look at your debt-to-income ratio. A lower debt-to-income ratio will also earn you approval with most lenders


Take your time to shop around for lenders with more friendly requirements. Carefully go over their policies and ensure they are at par with your financial goals.

Average debt consolidation loan rates?

Debt consolidation loans mostly have an APR ranging from between 5 and 36%. A lender’s credit history, income, and exact loan product determine what a borrower will be charged as the interest rate. 


Borrowers with excellent and good credit scores (650 to 850) often get the lowest credit scores. 


The loan term is also a critical determinant in what rate your lender will charge you as interest. A longer loan term will have you paying lower monthly repayments. However, you’ll pay more on interest over time. 


Therefore, paying your loan faster will have you save on interests. 


Borrowers’ data, including their income, repayment history, and credit profile will also determine what your lender will charge as interest rates. Therefore, it’s only normal that lenders will charge different interests for different borrowers.


Most personal loans for debt consolidation come with fixed interest rates. With such, the rates will remain constant throughout the life of your loan. Such will help you plan and budget better.


Variable rates, on the other hand, are not constant. And, will at times rise with the rise of the market average. That makes them expensive. 


But, generally, debt consolidation loans tend to carry higher rates than other loan products. And, that’s because they are unsecured, rendering them risky to lenders since they have no assurance that you’ll repay your loan. 

Which are the lowest rates on a debt consolidation loan?

Pinning down a specific rate on debt consolidation loans can be tricky. And, that’s because of the difference in lenders’ terms and policies. That includes borrowers’ credit profiles and the specific loan products in question. 


However, for our list above, the lender with the lowest rate is LightStream, with the lowest APR of 4.49%.


Please note that you can get even lower terms with select lenders and carefully-chosen loan products. As such, you should take time to shop around for lenders with better loan terms and interests.


However, most debt consolidation loans have higher rates. And, among many reasons, it’s because these loans are meant for users with multiple debts. These are usually large debts. 


They also mostly include revolving debts like credit cards. And, most of them have large accumulated debts and with registered high usage. Such can easily pull down your credit score and any missteps will damage your credit profile.


The best way to get the best rate on credit consolidation loans would be to boost your credit score. You can do that by first, paying off your existing loans. And debt consolidation greatly helps with that.


Paying off your loans will have lenders updating your records with different credit agencies. You’ll also do well to avoid taking in new loans unless it’s absolutely necessary. That saves you from possibly drowning in debts.


Another way of boosting your credit score is avoiding maxing out your credit card. It’s advisable that you keep it at 30% and below. You can also boost your credit score by leaving even your unused credit accounts open.


Also, to boost your credit score you’ll need to be constantly requesting your credit reports from any of the major credit agencies. 


Once you get them, carefully study them and be keen to note any possible errors. Once you do, notify the respective agency for corrections.

Alternatives to personal loans for debt consolidation

Despite being an excellent way of saving you from drowning in debts, debt consolidation doesn’t always work for everyone. And, at times, it even proves to be more expensive than other methods. As such, the following are some of the viable alternatives to debt consolidation;


  • Home equity loans – this is a common debt repayment method. Borrowers here use their homes as collateral to secure loans. Home equity loans are less risky to lenders. Hence, lenders easily approve them, with better loan terms and lower interest rates. However, these loans are risky to borrowers, and can have them losing their homes should they default on their loans.


  • Debt relief services – these companies will approach your existing lenders and negotiate better loan terms and lower rates on your behalf. They are mostly the way out for borrowers who don’t qualify for debt consolidation loans. Debt settlement companies, as they are otherwise called, will help you evade bankruptcy. However, they mostly attract higher fees. Ensure you’re familiar with a specific organization’s policies. You should also shop around while comparing different companies’ policies till you find one you’re comfortable with.


  • Debt counseling – this is an excellent arrangement for borrowers who have sunk deep in debts. Debt counseling companies are also often involved in debt management plans where borrowers make a single large payment to the company which then divides it among different lenders to service their respective loans. Most of these companies are non-profit making. Debt counseling companies will negotiate with your existing lenders for lower rates and flexible monthly repayments. For debt management plans, the service is hardly free. And, you’ll mostly pay a standard $50 fee and $20 to $75 monthly fee throughout the debt management period.


  • Credit card balance transfer – this helps borrowers offset their debts in a single line of credit. The cards mostly attract 0% APR for a defined period, usually up to 21 months. Such makes the process of repaying loans cheaper and faster.


  • Debt snowball – here, borrowers tackle their loans one by one, starting with small debts while maintaining the minimum payments. Upon successful payment of one debt, the old payment is moved to the next repayment till all the loans are cleared.

Frequently Asked Questions (FAQ)

No. instead, debt consolidation loans will likely boost your credit scores. You might note a decline in your score at first, but ultimately, you’ll note a boost.

The table above lists the currently best lenders with the best terms and lowest rates in the market today. Be sure to check them out.

A credit score of 660 and above. You should also show proof of income, financial stability, and good credit history.

Viable debt consolidation loans are ones with lower interest rates than the existing debts. Such reduces a borrower’s total debts making it easier to repay them.

Through personal loans for debt consolidation.

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